PracticeAccounting FirmsKPMG: Without liability cap another firm will go

KPMG: Without liability cap another firm will go

Big Four firm KPMG has warned that without reform of auditor liability another accounting giant could potentially be wiped off the financial map.

Link: Special report: Liability cap

Neil Lerner, head of risk management and a board member at KPMG, warned that the current market position is ‘very precarious’ and that without reform the profession would definitely lose another large firm.

‘The combination of fewer larger firms, rising claims and settlements, a lack of insurance cover, and the restricted amount of capital available to professional partnerships means that, without liability reform, the issue is not if another large firm will collapse, but when.’

‘We have yet to see exactly what mechanics the cap will take but we would like to see guidance being issued that links a cap to turnover of audit fees, for example. The decision needs to be suitable for all concerned.’

Lerner told Accountancy Age that he was confident that the three-week independent review by the OFT would confirm that a cap would ‘not be anti-competitive but pro.’

‘We are confident that the OFT will support our view that reform will actually increase the possibility of more competition for public company audits.

‘Far from stifling competition, we believe that auditor liability reform would increase it by encouraging more mid-tier firms into the market.

‘Reform of auditor liability would do no more than put auditing firms in the same position as other suppliers, and would not in any way weaken our determination to strive for the highest quality in our audits.’

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